Payment providers Visa and PayPal have announced plans to integrate cryptocurrency payments at checkout time, leading to increased adoption of the technology.
Cryptocurrency has been one of the biggest FinTech innovations in recent memory, and yet it's taken until recently for it to gain wide acceptance as a payment system. The tech sector has been looking for alternative uses for the blockchain tech underpinning cryptocurrencies, but the most clear-cut use is still its use as a digital currency system.
The price of Bitcoin peaked at around £15k in 2018 before crashing back down to around £2.5k, but recent spikes in the price up to over £40k have renewed interest in cryptocurrency tech. Technologist Elon Musk recently announced that Tesla invested $1.5bn in Bitcoin, and he is now regularly promoting lesser-known currency Dogecoin.
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Cryptocurrencies such as bitcoin are examples of decentralised blockchain-based public ledger systems. Currency miners run computer programs that search for new solutions to a simple cryptographic puzzle, being rewarded with a certain amount of the currency. These solutions allow new blocks to be added to the blockchain, and each block contains a list of transactions made by users.
The ledger of transactions (the blockchain) in a cryptocurrency is public and decentralised, meaning that there's no central issuing authority that can intervene to print more money if there's a shortage. This has been a huge part of the reason for investors speculating on currencies such as Bitcoin and Ethereum in recent years, but it also means the price can be volatile.
PayPal and Visa have both now announced plans to integrate cryptocurrencies into their payment systems. To counteract volatility, PayPal has said that it will be using a clearing house to perform separate small cryptocurrency transactions at the current market rate immediately at check-out time. This eliminates all of the risk of price crashing as the platform won't hold onto the coins for any length of time.
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Some merchants have accepted Bitcoin in the past but were forced to stop taking payments due to currency volatility. With conversions taking place instantly at check-out time, Visa and PayPal can eliminate that risk and remove the barrier to accepting crypto payments. The merchant's prices will be in their regular currency and they may not even know cryptocurrency has been used.
This move could result in a much wider adoption of cryptocurrencies, and is already fueling speculation on Bitcoin, Ethereum, and other currencies such as Litecoin and Dogecoin. Prices of popularly traded cryptocurrencies have increased across the board today in reaction to the news.
Source: Linkedin, Fastcompany
